Wednesday, 1 March 2017

Housing credit doubles in a decade

Although housing credit continued to chug along in notching growth of 0.5 per cent in the month, total credit growth sagged to just 0.2 per cent due to negative results for the business and personal sectors.

Housing credit for investors continued to rise to 6.6 per cent across the year to January, suggesting that further hikes may be in the post for investor loans.

Total credit growth was 6.4 per cent, while broad money growth was 7 per cent.

Deposit growth has strengthened considerably as banks look to shore up their capital.

Even term deposits, understandably out of favour for some time, are recording growth at a double digit pace, with some accounts set to offer bonus interest on larger balances.

Switcheroo

The total value of outstanding credit has doubled over the past decade to $1.64 trillion.

The exact split of loan purpose between owner-occupier and investor credit remains murky, with a net value of $49 billion having been switched away from investment loans since July 2015.

This reflects the interest rate differential between loan types, but note that the credit growth figures by loan type have been adjusted for the net value of switching.

The poor monthly result for business and personal credit sees housing resume its apparently inexorable rise in terms of market share.

The wrap

All regulatory eyes will be on the growth in investor loans, with more measures likely to be taken to cool this sector as 2017 progresses.